City leaders delve into who should run the show at Memorial Health System and Springs Utilities

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A 66-year tradition of the city owning Memorial Health System might
be on the brink of change, largely due to uncertainty surrounding
health care reform and the city's dire financial straits.

City Council recently directed Memorial's executives and board of
trustees to research options for how the health system should be
governed, including turning it into a private nonprofit or selling a
stake in the enterprise. A report is due in January.

The community has batted around similar ideas for years. Selling
Memorial was a hot potato in the 1999 mayoral race, and in 2001 a
commission appointed by the winner of that race, Mary Lou Makepeace,
recommended hanging onto it.

Now the prospect has arisen again, with the Council-appointed
Sustainable Funding Committee saying in its August report that Memorial
could fetch $250 million to $400 million. That would cover a lot of
streetlights, pothole-patching, parks maintenance and bus service
— although it's doubtful the money would be used that way,
because Council believes it's obligated to channel Memorial's assets
toward the community's health care. The question of how to do that,
instead, is sure to invigorate the debate.

A Memorial bailout?

But we get ahead of ourselves. For now, Council
wants to know if there's a better way to run the railroad, and if
selling makes sense.

Mayor Lionel Rivera is encouraging a "community conversation,"
saying, "Everything has to be on the table." The city could sell the
enterprise and use the money for health care purposes, sell a
significant share but retain seats on the board of trustees, or allow
Memorial to convert to a private nonprofit with no direct financial
gain to the city, he says. Rivera doesn't support the latter idea.

The mayor notes that since its purchase for $76,500 in 1943,
Memorial has never provided a financial return to the city. (Colorado
Springs Utilities, another enterprise, does through its $27 million
annual payment in lieu of taxes. Of course, that likely will phase out
over eight years under the just-passed Measure 300, unless a court
fight complicates matters.)

Rivera also doesn't like the fact that the city's general fund could
be liable for Memorial's losses, and that the City Charter gives
Council authority to impose a mill levy for that purpose. He says since
the charter provision predates tax limitation adopted in 1991 and 1992,
the Council might not need voter approval to raise taxes to bail out
Memorial if necessary.

Councilors Sean Paige and Darryl Glenn say they are ready to
consider the most drastic measure — a sale.

"I'm never saying never to anything," Glenn says.

Others might be tough customers. Councilor Scott Hente, an Air Force
veteran, worries that if Memorial slips out of the city's hands, those
covered by the military's TRICARE system might be left with few, if
any, treatment options. (Many local doctors and facilities don't accept
TRICARE.)

Indeed, the Sustainable Funding Committee notes, "There are many
complicated health, community and other issues that need further
study," and the group questions whether a sale or partial sale would
result in exporting capital.

Today, Memorial reinvests 100 percent of its gains into its
system.

'Distracting' Utilities

Memorial isn't the only enterprise under scrutiny. The city's
Sustainable Funding Committee says offloading Springs Utilities
wouldn't make sense, given the fact Utilities has so much debt —
$1.8 billion — which is more than it's worth.

Utilities' question for now is whether it makes sense to have a
surveyor, a builder, a blogger and a lawyer among nine people running a
municipally owned utility.

No, no and no, say three separate advisory committees, yet nothing
has been done about it.

Those panels — the City Charter Committee in 2004, the
Utilities Policy Advisory Committee in 2005 and the Sustainable Funding
Committee this year — have recommended entrusting Utilities to an
independent panel with knowledge of topics such as railroads (coal
delivery), environmental regulation (power plant emissions) and water,
instead of Council members who might have little or no such
expertise.

A separate board, the argument goes, would be less susceptible to
political winds and more apt to run Utilities with a eye to the long
term.

Citing an American Public Power Association survey, the Sustainable
Funding Committee notes only one in four municipally owned utilities
with more than 50,000 customers is governed by a city council.

Several Councilors say they want to talk about it, and acknowledge
the main sticking points will be if a new board should be appointed or
elected and whether the Council would retain rate authority.

Paige suggests a proposal could be submitted to voters in April 2011
to change the City Charter, which now puts the Council in charge of
Utilities.

"It's not a knock on the intelligence and good intentions of the
Council, but it's a huge, very complex industry that's only going to
get more complex as we go forward," Paige says, referring to changes in
environmental rules and clean energy. He'd also welcome a lighter
workload, as would Vice Mayor Larry Small.

"Utilities and all the other things we get involved in are
distracting us from governing the city," Small says. "In my mind,
there's a need to look into it." Councilors Jan Martin and Randy Purvis
also are open to debate, but Glenn says Utilities needs more Council
attention, not less.

"We meet once a month to oversee a billion-dollar corporation,"
Glenn says. "It begs the question of whether we need a full-time
Council."